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Adviser profile: Stuart Cardozo and Shane Gorman of SWC Independent

Stuart Cardozo has tackled recent regulatory changes at SWC Independent by hiring energy sector specialist Shane Gorman and shifting the firm’s focus to advising offshore oil workers

The CVs (pt.1)

Stuart Cardozo's CV:

2009–present: SWC Independent, director

2005–2009: Mortgage Solutions (UK), IFA

2000–2005: Spence & Spence, IFA

1997–2000: Canada Life, tied agent

1995–1997: GAN Financial Services, tied agent

The CVs (pt.1)

Stuart Cardozo's CV:

2009–present: SWC Independent, director

2005–2009: Mortgage Solutions (UK), IFA

2000–2005: Spence & Spence, IFA

1997–2000: Canada Life, tied agent

1995–1997: GAN Financial Services, tied agent

The CVs (pt.2)

Shane Gorman's CV:

2017–present: SWC Independent, mortgage and protection associate

2016–2017: Step Change in Safety, workforce engagement coordinator

2011–2016: Dolphin Drilling, offshore radio operator

2009–2011: FAB Assurance, regional director

2007–2009: Integrity IFA, IFA

2006–2007: HBOS, personal financial adviser

 

Oil (pt.1)

Shane Gorman’s father was killed in the Piper Alpha oil rig disaster 30 years ago. Having started his career as an IFA, Gorman switched to working in safety roles on offshore rigs, gaining a strong reputation in that world. He still works on promoting offshore safety in his spare time.

'I had a pivotal role between offshore workers and the boardroom to learn from the mistakes and spread good practice,' he says. 'I now continue that as a volunteer and work at OAG [oil and gas] Financial [a trading style of SWC Independent] full time. But I still have a high profile in the sector, which helps generates business for OAG.

Another issue close to Gorman’s heart is that the families of offshore workers are not well protected as a result. 'Everything is about the safety of the person who is offshore and they don’t think of the partners and kids, and the security they need,' he says.

'Offshore workers’ pensions tend to be all over the place because they work for so many companies and their time is awkwardly fragmented between offshore and onshore. Most clients also need financial planning help, which I refer to [SWC director] Stuart [Cardozo].'

 

 

Oil (pt.2)

Gorman says the oil and gas sector remains an important part of his life.

'Advising the oil and gas sector is personal,' he says. 'I can make a difference in protecting families and making sure nobody else has to go through what I went through.

'We do everything we can to make sure this person gets back to them safely. I worked offshore myself and I understand it is not easy. This builds deep trust.

'My father had life cover in place when he died, but no actual analysis was ever carried out to assess how much life cover was needed to replace his income,’ says Gorman. ‘Only on payment did the reality of a large shortfall become apparent. This had a massive effect on a family trying to cope with loss, while also dealing with financial difficulties.'

 

Shifting focus

Gorman now works as mortgage and protection adviser principal at OAG. Cardozo set up SWC in 2009 with his wife, company administrator Lisa. The firm grew gradually with the help of an accountancy connection and, in 2015, an appointed representative, Conduit Private Finance.

'I run Conduit in partnership with a commercial finance broker and I provide the regulated advice side to his clients,' says Cardozo (pictured left).

'That has helped the uplift in figures. But client numbers and average assets under advice have also risen.'

Cardozo says they wanted a trading style to target that sector. Gorman, who is well known and trusted in the offshore energy sector having been a prominent safety campaigner, says the mortgage and protection service is already proving popular. But he and Cardozo think it will also provide good referrals to SWC’s financial planning business.

 

Regulatory wrangling

Karate black belt Cardozo has been feeling the pain of regulation, and fighting back. The revised Mifid II regulations, which came into force in January, and general data protection regulations (GDPR), due in May, are threatening his bottom line. They prompted a major transition to maintain profits.

Changes include two fee hikes and the simplification and improvement of service levels. The Edinburgh-based firm has invested in better technology, while targeting scale and wealthier clients in the oil and gas industry.

Cardozo predicted a year ago Mifid II would be onerous for small advice firms. He was proved right as it has taken him 67% longer to complete an annual review since January.

'Mifid II and GDPR have meant increasing workload,' says Cardozo. 'For example, under Mifid II you now have to assess the [suitability of] plans and annual review recommendations for clients formally.

'We always did that, but it is more formal and time-consuming now. With GDPR, there will be changes to processes such as disclosure document opt-ins and lots of training in areas such as data encryption.'

Transition period (pt.1)

Another important step for SWC was launching a personal finance portal, from back-office software provider Intelliflo, to clients in December.

'The portal has been successful,' says Cardozo. ‘It has a client dashboard to view real-time investments, which some wrap platforms can’t do. It gives clients detailed information, for example, so they can track performance and click through to the underlying holdings, view the fact sheets and [see performance over different periods].

'That doesn’t put more pressure on us [to provide more consistent performance], it just encourages conversation and questions, which is what we want. The portal also has secure messaging and document transfer.'

Alongside that, SWC also launched a new website with more functionality and a link to the portal.

Cardozo says he is also interested in SimplyBiz’s new 'end-to-end' financial planning system Centra, which could be a glimpse of the future. It is designed to link the planning process seamlessly with the suitability reporter, Intelliflo, research tools and risk profilers.

 

 

Transition period (pt.2)

Cardozo owns SWC equally with Lisa. They pay themselves a small salary plus, in the past two years, annual dividends of around £50,000 between the two.

SWC grew its profit from £54,000 (60% of revenue) in 2015 to £92,000 (69%) in 2017. This dropped slightly in the year to the end of March 2018 due to Gorman joining, but this move should help next year’s profits jump to £100,000 (50%), says Cardozo.

SWC only made £537 recurring income per active client in 2018. Cardozo says it previously took two to three hours to provide the service at a cost of around £500. Due to Mifid II, this has increased to three to five hours, costing between £525 and £875, he estimates. With all the changes, he projects the recurring income per active client in 2019 will be £700.

'If the firm had to rely solely on recurring income, we wouldn’t be making profit,' Cardozo admits. 'But I have always modelled the firm on transactional and initial fees.'

He has increased ongoing fees from 0.5% to 0.65%. 'I will raise them again to 0.75%, but I didn’t want to do that in one big jump,' he says. 'Given most clients are still accumulating, assets are increasing all the time. So with this and the fee rise, the ongoing advice will be profitable. Also Shane’s work is not yet bringing in recurring income but it will do.'

Cardozo says he will also now pass all mortgage work to Gorman. 'This will give me more time to enhance the ongoing financial planning service, for example, by sending updates to clients in response to events, and providing them with more education,’ he says. ‘It will also enable me to see more clients.'

Drilling down

The firm uses a serviced office and meeting rooms in Edinburgh’s stately Lansdowne Crescent, but staff work mostly from their home in the north of the city.

Another change for this year is likely to include taking on a full-time office in Leith, closer to where they live.

Cardozo says his work-life balance is not as good as he would like. This will improve once the office is bought. It will allow more separation between work and home, and give him more family and karate time.

'I’m 46 and I have time to create something to sell on or pass on to one of my daughters,' he adds. 'We will soon have an office and will recruit another administrator. Then we could build and develop the model and processes further to allow us to slot in more advisers generating their own business.'

But for now, Cardozo is concentrating on bedding in the marketing campaign for OAG, which has centred around a new website and Facebook adverts targeting offshore workers. 'That is the biggest project we have ever done,' he says.

Gorman adds: 'The Facebook ads target people who move through the helipad in Aberdeen, so they are highly specific. Combining that with recognition of me in the advert has been highly effective and we have received eight enquiries in two weeks.'

Cardozo and Gorman first met when they worked together for a life company more than 20 years ago, so they are confident in developing a good working relationship.

'Shane and I get on well,’ says Cardozo. ‘It is important that we are similar ages, so we are both in it for the same reasons and we can age with our client banks.'

Gorman says: 'I can be [full of ideas] and Stuart gives me the grounding, which helps to keep me focused and on point.'

Cardozo agrees, adding he is more analytical and 'not a natural free-thinker.' But he says he has had to get better at this to run a business in the modern, heavily-regulated environment.

The fee bit...

SWC has two service levels, having removed its lowest (telephone and email-based) proposition this year. It has 50 clients on its standard service, which offers one face-to-face annual review at 0.65%, subject to a minimum £400 a year.

SWC has 33 clients on its full financial planning service, which includes pension planning, inheritance tax planning, and free mortgage advice. This is also 0.65% a year but with a minimum of £600.

'We moved initially from 0.5% to 0.65% because we want to provide access to affordable advice,' says Cardozo. 'But the industry average is 0.75%, so we will move to that gradually. My ideal business model is 100 clients, all paying around £1,000. But we won’t switch away from percentage-based charging, because that [provides the most reliable income].'

 

The investment bit

SWC has run model portfolios since it launched in 2009. They are adapted versions of research company Rayner Spencer Mills' portfolios, constructed to align with Distribution Technology risk profiles. Recently SWC has started using multi-asset and multi-manager funds.

'I still use the models, because they are doing well,' says Cardozo. 'But I have started using more multi-asset funds because they are easier. In the models, if a fund manager leaves, or a fund is taken out, you have to write to clients to [get their permission to] make the change. It is time-consuming [and even more so after Mifid II].'

SWC uses Dynamic Planner and Synaptic to research funds and Trustnet to monitor performance. It benchmarks performance against Investment Association sectors.

Favourite multi-asset or multi-manager funds include the Premier Liberation, F&C MultiManager Lifestyle, and Standard Life MyFolio funds. Cardozo also uses Legal & General Multi-Index funds despite not being a particular exponent of passive, he says.

'If active and passive were the same price, which would you choose?' he says. 'I would choose active because it has the potential to return more.'

The best of Twitter

You can follow Stuart Cardoza on Twitter using the handle @SWCIndependent.

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